Support

A cookie is a piece of data stored by your browser or device that helps websites like this one recognize return visitors. We use cookies to give you the best experience on BNA.com. Some cookies are also necessary for the technical operation of our website. If you continue browsing, you agree to this site’s use of cookies.

Marketing Services

Bloomberg Next marketing services allow clients to elevate their brands and extend their reach through our established and trusted expertise, enhanced with engaging event production, appealing design, and compelling messaging.

Skeptics of border adjustability have said for weeks that the controversial import
tax provision was on life support.

Its prospects in current form still appeared to be in doubt after a House Ways and
Means hearing May 23, where some committee Republicans raised concerns about the 20
percent import tax. Ways and Means Republicans including Mike Kelly (Pa.) and James
B. Renacci (Ohio) have long questioned the provision. That skepticism was on open
display at the hearing, with others such as Rep. Erik Paulsen (R-Minn.) also questioning
the impact of border adjustability.

The growing uncertainty means that Ways and Means Chairman Kevin Brady (R-Texas) could
have trouble passing a bill that includes the provision out of committee. He has said
in recent weeks that his staff is working on a revised version of the BAT but hasn’t
provided any details. Brady’s cause wasn’t helped by Treasury Secretary Steven Mnuchin,
who sounded a clear warning about the BAT on the day of the hearing, saying it wouldn’t
level the playing field for companies.

Brady said after the hearing that he intends to keep pushing the controversial provision.
Asked if the BAT provision was dead, he said it wasn’t. “On a reform this bold, Republicans
and Democrats would ask what the impacts are,” Brady said, adding that a “good transition”
could help answer some of the questions raised by members.

House Speaker Paul D. Ryan (R-Wis.) said May 18 that a border-adjusted tax “should
have some kind of an adjustment and phase-in period.” The retail lobby, however, has
said it opposes a BAT in any form.

Friendly Fire

Paulsen said at the May 23 hearing that he couldn’t support the provision that taxes
imports and exempts exports as it was outlined in the House GOP tax blueprint released
in June 2016.

Other concerns were aired by Rep. Adrian Smith
(R-Neb.), who said there are some “barriers” in the proposal that could prevent tax
reform from being “truly pro-growth,”
and Kelly, who said the border tax could raise prices for consumers.

Mnuchin, who is helping shape tax legislation by working with the House and Senate,
said during an appearance in Washington that the BAT “has very different impacts on
different companies, it has the potential to pass on significant costs to the consumer,
it has the potential of moving the currencies.”

The Treasury secretary met with Democrats on May 23, according to Rep. Sander Levin
(D-Mich.) “He said the administration does not support BAT in its present form,” said
Levin, adding that the Trump administration also doesn’t support the basic idea of
border adjustability.

When told about Mnuchin’s comments, Ways and Means member Devin Nunes (R-Calif.) said,
“I keep saying I would like to see a plan where something works” besides a border-adjusted
tax. “Haven’t seen one yet.”

Border adjustment would be a big change and there will be lots of discussion about
it along the way, said Brian Reardon, an adviser to the American Made Coalition, which
supports the House GOP blueprint.

“What I didn’t hear was anybody with an alternative plan,” he said. “There was lots
of picking at it, but nobody saying here’s what we can do instead.”

Off the Hill

The hearing wasn’t likely to make the passage of the BAT “any more likely than it
was yesterday,” said Jon Traub, a former Republican staff director for the Ways and
Means Committee.

“The hearing was quite substantive; members were clearly trying to better understand
the potential impact of the BAT. Not surprisingly, there were a few members on the
Republican side of the aisle who expressed some caution about the BAT,”
said Traub, now managing principal of tax policy at Deloitte Tax LLP.

Companies could prepare in this uncertain tax environment by considering situational
modeling that weighs proposals against one another while creating customized alternatives
to analyze the effects of various tax reform options, Traub said in an email to Bloomberg
BNA. “When you’re confident in what you know about your company and reform, and can
model the likely impacts, then you will be prepared to execute regardless of the eventual
outcome of changes in tax,” he said.

The hearing was a necessary step in ultimately getting to a detailed proposal, said
Sage Eastman, a former senior counselor for Ways and Means. “It confirmed what others
have said; if border adjustment is going to survive, there needs to be changes,” he
said.

“I think it’s clear that there is significant skepticism. But again, we don’t have
details. The chairman and the speaker have to continue to develop their proposal and
continue to sell their proposal,” said Eastman, now a principal at Mehlman Castagnetti
Rosen & Thomas.

A tax lobbyist pointed out that if opponents could have killed border adjustability,
they would have already done so. “And with leadership clearly still supporting it,
as long as border adjustability doesn’t die of the blood loss, I’m not sure what eventually
kills it,” the lobbyist told Bloomberg BNA in an email.

Business View

The hearing was heavily attended by representatives from the retail industry, which
has largely been critical of the provision.

Rising consumer prices was the focus of Target Corp. CEO Brian Cornell’s testimony,
who said the border adjustment tax would more than double the retailer’s tax rate
because the company relies heavily on imports. Target is based near Paulsen’s district,
and the Minnesota lawmaker is a former employee. But William Simon, a former Wal-Mart
Stores Inc. president and CEO, spoke in favor of it.

“I think the support for this idea is very small, and what we heard even among Republican
members is not a lot of confidence for this provision,” said David French, vice president
of government relations for the National Retail Federation. “It’s a question of how
much longer the committee continues to pursue a dead end.”

Rep. Carlos Curbelo (R-Fla.) shrugged off the idea that the committee will need to
abandon the provision because members don’t agree on it. Curbelo said he sees consensus
forming around the idea of a long transition period for the BAT, as well as other
elements of the House plan.

“It’s the same as our path forward on every other element of our tax reform proposal:
We need to continue working on them, refining them and building consensus within the
committee,”
he told Bloomberg BNA after the hearing. “That’s why we’re having these hearings,
so everyone can ask their questions, so we can get expert input, and continue working
this. This is a living process.”

All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to books@bna.com.

Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)

Notify me when updates are available (No standing order will be created).

This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to research@bna.com.

Put me on standing order

Notify me when new releases are available (no standing order will be created)